Research On The Political Connections And The Performance Of Financial Subsidies

Since three decades of the reform and opening up, our private enterprises have developing rapidly, andprivate economy has made important contributions to our country’s economic development. But during thedevelopment of private enterprises, financial discrimination and unfair treatment have always hinderingprivate economy’s development. Private enterprises’ identity is one of the main causes of thesephenomena.In recent years, some private enterprises try to establish political relations to get convenience ofobtaining financing and financial subsidy, to improve their performance.Based on the sample of private enterprises of2010-2012listed in the Shanghai stock market andShenzhen stock market, this article studies political relations of private enterprises’ impact on governmentsubsidies’ performance. This article first studies political relations’impact on enterprises’obtaining financialsubsidy, the result shows that private enterprises with political relationship have easier access to financialsubsidy. Then the article studies political relations’impact on enterprises’obtaining financial subsidy underdifferent institutional environments, the result indicates that private enterprises with political relationshiphave easier access to financial subsidy in the case of poor institutional environment. Finally, this articlestudies enterprises’financial subsidy with political relationship’s effect on their performance, it shows thatenterprises’financial subsidy with political relationship cannot improve their performance, but decrease theirperformance conversely. It violates the goverments’aim to improve enterprises’ performances by financialsubsidy. Private enterprises’political relationship decreases the function of financial subsidi’s performance.Political relationship have brought resource advantages to private enterprise indeed, but theseadvantages undermine the fairness of economic competition, reduce the efficiency of configuration ofgovernment resources, and waste social resources. After private enterprises get financial subsidy throughtheir political relationship, enterprises’ performances have not been improved. It shows that privateenterprises’over-reliance on the political relations to get competitive advantages is not sustainable,improving the enterprises’ operating level and core competitiveness is the only key to improve theirperformance.